China fab-tool firm seeks to unseat rivals

SAN JOSE, Calif.  Looking to turn the IC-equipment industry upside down, Chinese startup Advanced Micro-Fabrication Equipment Inc. (AMEC) has rolled out its initial tools, unveiled its strategy and disclosed plans to go public in the future.

AMEC (Shanghai)  one of the few IC-equipment companies based in China  has unveiled a separate reactive ion etcher and a high-pressure chemical vapor deposition (HPCVD) tool. Both 300-mm systems are geared for use in manufacturing 65-nm chip designs and beyond.

To date, the company is clearly the most advanced fab-tool vendor from China. The nation boasts some minor silicon wafer suppliers, electronic materials firms and a few low-end equipment vendors. Up to now, fab-equipment technology from China has been laughable and decades behind the tools from Europe, Japan and the U.S.

AMEC, sometimes referred called the "Applied Materials of China" by some observers, could be a new force in the maturing equipment industry, which has seen few startups in recent times. In fact, the company claims that its machines have some competitive advantages over tools from the likes of Applied Materials Inc., Lam Research Corp., Tokyo Electron Ltd. (TEL) and others.

AMEC  which consists of former employees of Applied, Lam and others  hopes to unseat its rivals in China as well as in global markets. "We want to be a leader  not a follower," said Gerald Yin, chairman and chief executive at AMEC, in an interview. "We plan to be a global company  not an Asian company."

But the startup faces some challenges to reach its lofty goals. First, AMEC is simply late to the game in a maturing market. Second, there may be little or no room for a new entry in the etch and CVD markets; most chip makers already have their favorite and entrenched fab-tool suppliers and are not willing to gamble on a new vendor, especially one from China.

Third, it's unclear if a new player from China has the technology, funding or roadmap to compete against Applied, Lam and TEL. And finally, there are some worries about the intellectual-property (IP) issues and doing business with a Chinese fab-tool supplier.

Yin dismissed many of those notions, saying that there is indeed room for a new startup in the competitive semiconductor equipment business.

A former executive at Applied, Lam and other companies, Yin said that the semiconductor industry is still looking for new and innovative ideas to maintain the breakneck pace of Moore's Law. But one of the problems is that current fab-tool suppliers have grown somewhat complacent and are finding it difficult to keep pace with the demands from leading-edge chip makers, he said.

"There are so many challenges for the semiconductor industry," he said. AMEC, he said, is bringing a new solution to the etch and CVD party. And more importantly, the company has "done its due diligence in IP," he added.

But is that enough to keep the company out of legal trouble? It's unclear at this point. Then, there are the touchy export control issues in China. Generally, all advanced fab-tool vendors must obtain an export license from the U.S. to sell their gear into China.

AMEC faces a slightly different scenario: The company must import advanced subsystems and components from foreign suppliers into China. In response, AMEC claims that the U.S. government has issued an export license for the importation of "critical devices" to the company.

In any case, the company has come a long ways in a short time. Founded in 2004, AMEC has kept somewhat of a low profile. Over the years, the company has garnered some $111 million in funding from several entities, including Qualcomm, Samsung, Walden International, Lightspeed Venture Partners, Goldman Sachs and others.

AMEC, which has 250 employees, has a manufacturing site in Shanghai. In June of 2007, it reached a milestone by quietly shipping its initial beta tools to undisclosed customers. By early 2008, AMEC hopes to have a total of 6 tools in various beta sites.

Beyond that, AMEC is seeking to become profitable by 2009. By 2010, it hopes to have some 70-to-100 systems in the field, with a possible initial public offering (IPO) in the works in that timeframe.